Market Snapshot
briefing.com
| Dow | 31961.80 | +142.75 | (0.45%) | | Nasdaq | 11354.90 | +166.06 | (1.48%) | | SP 500 | 3895.42 | +39.66 | (1.03%) | | 10-yr Note | -28/32 | 3.67 |
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| | NYSE | Adv 2305 | Dec 763 | Vol 1.31 bln | | Nasdaq | Adv 2885 | Dec 1576 | Vol 5.44 bln |
Industry Watch
| Strong: Financials, Communication Services, Information Technology, Consumer Discretionary |
| | Weak: -- |
Moving the Market
-- Roller-coaster action in bank stocks
-- Treasury yields move higher as panicky buying dissipates
-- Digesting the February Consumer Price Index report
-- S&P 500 runs into resistance at its 200-day moving average
-- Geopolitical angst following news that a U.S. reaper drone was downed after colliding with a Russian jet over the Black Sea
-- Leadership by mega-cap stocks
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Closing Summary
14-Mar-23 16:25 ET
Dow +336.26 at 32155.31, Nasdaq +239.31 at 11428.15, S&P +64.80 at 3920.56
[BRIEFING.COM] Stocks were on a rebound-minded track to start today's session, bolstered by strength in the bank stocks and a small measure of relief that the February Consumer Price Index (CPI) wasn't much worse than feared.
Just about everything rose with the rebound tide, as there was some opportunistic trading moves in the wake of a short-term oversold market that saw the SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Banking ETF (KRE) increase as much as 8.6% and 11.2%, respectively. The S&P 500 would climb as much as 2.1% to 3,937 before running out gas on the underside test of its 200-day moving average (3,939).
Simultaneously, Treasuries were selling off with some of the safety premium they had enjoyed in recent sessions being drained away. The 2-yr note yield scraped 3.82% in overnight action, but at one point in today's trade touched 4.40% before settling the session at 4.20%, up 18 basis points from yesterday. The 10-yr note yield, in turn, visited 3.47% overnight, but climbed back to 3.67% before settling the day at 3.64%, up 12 basis points from yesterday.
Treasuries were also influenced by the CPI data that showed consumer inflation sticking at higher levels, presumably leaving the Fed an option to raise the target range for the fed funds rate by 25 basis points at the March FOMC meeting. Total CPI was up 6.0% year-over, versus up 6.4% in January, and core CPI was up 5.5% year-over-year, versus up 5.6% in January. The Fed's inflation target is 2.00%.
The CME FedWatch Tool shows a 77.5% probability that the Fed will raise rates by 25 basis points, which is roughly what was expected ahead of the CPI release.
The stock market lost its rebound momentum after failing to break through its 200-day moving average. At its low in the afternoon trade, the S&P 500 hit 3,873. The fade from session highs was precipitated by a pullback in the bank stocks, which reacted negatively to a report that S&P had put First Republic Bank (FRC 39.63, +8.42, +27.0%) on creditwatch negative citing its funding profile risk. That news came on the back of a report earlier in the session that Moody's had downgraded the U.S. banking system to Negative from Stable.
The SPDR S&P Bank ETF (KBE) ended the day with a more modest 1.9% gain while the SPDR S&P Regional Banking ETF (KRE) pulled in with a 2.1% gain.
The afternoon retreat was also influenced by some geopolitical angst after it was reported by CNN that a U.S. Air Force drone was forced down by a Russian fighter jet over the Black Sea.
It was looking like it might be a very disappointing close for the stock market, but there was a renewed and concerted buying effort in the last 45 minutes among the mega-cap stocks that left the major indices finishing the session on an upbeat note, although still off their morning highs.
The Vanguard Mega-Cap Growth ETF (MGK) rose 2.3%, paced by a material gain in Meta Platforms (META 194.02, +13.12, +7.3%) after the company announced plans to cut 10,000 more jobs and close 5,000 open positions in a further cost-cutting action.
All 11 sectors closed the day in positive territory. The communications services sector (+2.8%) led the way followed by information technology (+2.3%), financials (+2.2%), and consumer discretionary (+1.7%). The consumer staples (+0.8%), real estate (+0.8%), energy (+0.9%), and health care (+0.9%) sectors brought up the rear.
Advancing stocks led declining stocks by a 3-to-1 margin at the NYSE and by a 2-to-1 margin at the Nasdaq in a heavily-traded session.
- Nasdaq Composite: +9.2% YTD
- S&P 500: +2.1% YTD
- S&P Midcap 400: +0.9% YTD
- Russell 2000: +0.9% YTD
- Dow Jones Industrial Average: -2.9% YTD
Reviewing today's key economic data:
- Total CPI was up 0.4% month-over-month in February, as expected, and up 6.0% year-over-year -- the smallest 12-month increase since September 2021 -- versus up 6.4% in January. Core CPI, which excludes food and energy, was up 0.5% month-over-month (Briefing.com consensus +0.4%) and up 5.5% year-over-year -- the smallest 12-month increase since December 2021 -- versus up 5.6% in January.
- The key takeaway from the report is that it continues to show inflation running well above the Fed's 2.0% inflation target. While the banking problems have taken a 50 basis points rate increase off the table at the March FOMC meeting, this report should ensure that the Fed raises rates by 25 basis points, unless it wants to send a message that the banking problem is a bigger issue than people think by not raising rates only a few weeks after the Fed Chair teased the possibility of a 50 basis points rate hike at the March meeting.
- The February NFIB Small Business Optimism Index checked in at 90.9 (prior 90.3)
Looking ahead to Wednesday, market participants will receive the following economic data:
- 07:00 ET: MBA Mortgage Applications for the week of March 11 (prior 7.4%)
- 08:30 ET: March Empire State Manufacturing (Briefing.com consensus -8.0; prior -5.8)
- 08:30 ET: February Retail Sales (Briefing.com consensus 0.2%; prior 3.0%) and Retail Sales, Ex-Autos (Briefing.com consensus -0.1%; prior 2.3%)
- 08:30 ET: February Producer Price Index (Briefing.com consensus 0.3%; prior 0.7%) and core PPI (Briefing.com consensus 0.4%; prior 0.5%)
- 10:00 ET: January Business Inventories (Briefing.com consensus 0.0%; prior 0.3%)
- 10:00 ET: March NAHB Housing Market Index (Briefing.com consensus 42; prior 42)
- 10:30 ET: EIA Crude Oil Inventories for week of March 11 (prior -1.69M)
- 16:00 ET: January Net Long-Term TIC Flows (prior $152.8 bln)
Energy prices and energy stocks slide
14-Mar-23 15:30 ET
Dow +43.83 at 31862.88, Nasdaq +119.51 at 11308.35, S&P +26.22 at 3881.98
[BRIEFING.COM] A larger rally effort earlier today has been reined in this afternoon with initial resistance coming on the S&P 500's test of its 200-day-moving average (3,939). The high today for the S&P 500, reached shortly before the start of the New York lunch hour, was 3,937. Since then, it has bene mostly trend-down action.
Bank stocks have moved well off their best levels of the session. The SPDR S&P Regional Banking ETF (KRE) had been up as much as 11.2% but is now up just 1.2%.
Every S&P 500 sector has pulled back from higher levels. The energy sector (-0.1%) has dipped into negative territory with stocks there pressured by a sizable retreat in energy prices that has been precipitated in part by growth concerns. WTI crude futures are down 4.9% to $71.17/bbl and natural gas futures are down 1.1% to $2.70/mmbtu.
Exxon Mobil (XOM 105.86, -0.68, -0.6%) is a weak link, but Dow component Chevron (CVX 159.59, +0.88, +0.6%) is exhibiting some relative strength that is acting as an offset.
Energy complex futures settle lower
14-Mar-23 15:00 ET
Dow +142.75 at 31961.80, Nasdaq +166.06 at 11354.90, S&P +39.66 at 3895.42
[BRIEFING.COM] Recent trading has the major indices consolidating near, but slightly higher, from session lows -- still all green across the board.
Small and mid cap stocks are outperforming their larger peers. The Russell 2000 and the S&P Mid Cap 400 each up 1.7% apiece.
Energy complex futures settled in a weaker fashion. WTI crude oil futures fell 4.7% to $71.27/bbl and natural gas futures lost 0.8% to $2.69/mmbtu.
On an energy related note, the S&P 500 energy sector (+0.6%) is about middle of the pack among sector performers.
Real estate sector slips into the red
14-Mar-23 14:30 ET
Dow +160.46 at 31979.51, Nasdaq +177.54 at 11366.38, S&P +42.35 at 3898.11
[BRIEFING.COM] The market took another leg lower recently. The S&P 500 real estate sector (-0.1%) slipped into negative territory.
Notably, the 10-yr Treasury note yield has been drifting somewhat lower as stocks declined. The 10-yr note yield is up eight basis points to 3.60%.
Apple (AAPL 151.30, +0.82, +0.5%) will delay bonuses for some employees as part of cost-cutting efforts and plans to freeze hiring, according to Bloomberg.
Also, Ohio AG Dave Yost at press conference said he is filing a lawsuit against Norfolk Southern (NSC 207.49, -0.14, -0.1%) for its train derailment in East Palestine, OH.
Market breadth remains positive despite moves lower at index level
14-Mar-23 14:05 ET
Dow +116.56 at 31935.61, Nasdaq +160.95 at 11349.79, S&P +38.15 at 3893.91
[BRIEFING.COM] The main indices have settled into a narrow range near their lows for the day, but still maintain decent gains.
Despite the market taking a sharp turn lower recently, advancing issues still lead declining issues by a better than 3-to-1 margin at the NYSE and a better than 2-to-1 margin at the Nasdaq.
Separately, growth stocks have a slight performance edge over value stocks. The Russell 3000 Growth Index is up 1.4% versus a 1.0% gain in the Russell 3000 Value Index.
Rates and bank stocks turn in opposite directions while inflation holds pretty steady
A week's worth of movement -- nay, a month's worth or perhaps even a year's worth or several years worth of movement -- was seen in the Treasury market and certain bank stocks ahead of the 8:30 a.m. ET release of the February Consumer Price Index.
To wit: the 2-yr note yield was up as many as 28 basis points to 4.30%, the 10-yr note yield was up as many as 11 basis points to 3.63%, shares of First Republic Bank (FRC) were up more than 50%, and shares of PacWest Bancorp (PACW) were up close to 40% as were shares of Western Alliance Bancorporation (WAL).
Why? The simple answer is, because the moves ahead of those moves had been so extreme. From their highs last Wednesday, the 2-yr note yield had plunged as many as 124 basis points to 3.82%, the 10-yr note yield had fallen as many as 54 basis points to 3.47%, and shares of FRC, PACW, and WAL had cratered as much as 85%, 82%, and 90%, respectively.
Said another way, Treasuries were overbought and stocks, namely bank stocks, were oversold on a short-term basis. That recognition gave way to some opportunistic trading activity driven by the belief that there would at least be some short-term swings in the opposite direction.
Hence, big swings were happening even without the benefit of knowing what the February Consumer Price Index would show.
What everyone knows now is that total CPI was up 0.4% month-over-month in February, as expected, and up 6.0% year-over-year -- the smallest 12-month increase since September 2021 -- versus up 6.4% in January. Core CPI, which excludes food and energy, was up 0.5% month-over-month (Briefing.com consensus +0.4%) and up 5.5% year-over-year -- the smallest 12-month increase since December 2021 -- versus up 5.6% in January.
The breakdown of the report, however, had its share of eyebrow-raising inflation figures. The shelter index was up 0.8% month-over-month (vs up 0.7% in January), the transportation services index was up 1.1% month-over-month (vs up 0.9% in January), and the used cars and trucks index was down 2.8% month-over-month (vs down 1.9% in January), which was nowhere close to the indication in the Manheim Index that indicated used car prices were up 4.3% month-over-month in February.
Additionally, services inflation was up 7.6% year-over-year, unchanged from January, and services inflation less rent of shelter was up 6.9% year-over-year, versus 7.2% in January, while services inflation less medical care services was up 8.3% year-over-year, versus 8.2% in January. Meanwhile, services inflation less food, shelter, and energy was up 3.7% year-over-year, versus up 4.0% in January.
The key takeaway from the report is that it continues to show inflation running well above the Fed's 2.0% inflation target. While the banking problems have taken a 50 basis points rate increase off the table at the March FOMC meeting, this report should ensure that the Fed raises rates by 25 basis points, unless it wants to send a message that the banking problem is a bigger issue than people think by not raising rates only a few weeks after the Fed Chair teased the possibility of a 50 basis points rate hike at the March meeting.
The fed funds futures market seems to agree with the latter assumption. It shows a 91.5% probability now of a 25 basis points rate hike (versus 76% before the release).
In general, the equity market appears placated for now by the understanding that today's CPI report wasn't much worse than expected, by the hope that the banking problems won't be as bad as feared, and the realization that market rates, while up this morning, are much lower still than they were last week.
Currently, the S&P 500 futures are up 46 points and are trading 1.1% above fair value, the Nasdaq 100 futures are up 133 points and are trading 1.0% above fair value, and the Dow Jones Industrial Average futures are up 331 points and are trading 0.9% above fair value.
-- Patrick J. O'Hare, Briefing.com
Meta Platforms cost-cutting efforts receiving more likes as shares continue to rally (META)
In the span of about six months, Meta Platforms (META) went from full speed ahead on its metaverse aspirations, ready to invest whatever it took to support that transition, to one that's cutting costs more aggressively than virtually any other tech company. This morning, META published a Newsroom post that provided more details about its "year of efficiency", including a plan to lay off about 10,000 more employees, while also closing around 5,000 additional roles that META hasn't yet filled.
- These layoffs are on top of the 11,000 positions that were eliminated late last year as META and other social media companies like Snap (SNAP), Pinterest (PINS), and Twitter contended with a sharp slowdown in digital advertising spending and rising competition from TikTok.
- As difficult as the business climate has been, it has forced META and CEO Mark Zuckerberg to refocus and prioritize the company's bottom-line, and, by extension, the profitable Family of Apps (Facebook, Instagram, WhatsApp) segment.
- Rewinding to META's disappointing 3Q22 earnings report on October 26, in which it missed EPS expectations for the third time in four quarters, the company guided for FY23 total expenses of $96-$101 bln. At the midpoint, this outlook reflected a yr/yr increase of 15% and seemed a bit tone-deaf given the rough business conditions. Not surprisingly, the stock was crushed the following day to the tune of a 25% drop.
Since then, though, it's been a completely different story for META and the stock.
- A couple weeks after that dreadful earnings report, the company lowered its FY23 expense guidance to $94-$100 bln due to slower anticipated growth in payroll expenses and cost of revenue. Then, when META reported Q4 earnings in early February, it cut its FY23 expense guidance again, this time to $89-$95 bln. Now, after taking into account these latest layoffs, META is forecasting total expenses to be in a range of $86-$92 bln, representing an increase of just 1.5% at the mid-point.
- Job cuts are only part of the solution. META is also looking to "flatten the organization" by removing multiple layers of management, while asking some managers to also be contributors.
- Additionally, instead of sinking billions of dollars into the money-losing Reality Labs division (Metaverse, VR equipment), spending will be almost entirely allocated to tools that enhance META's applications, making them more competitive and attractive to advertisers. Most notably, this will include expanding its AI capabilities to improve monetization and to increase ROI for advertisers.
All of this has been music to investors ears, as illustrated by the stock's near 100% gain since that Q3 earnings report. The bottom line is that while advertising demand is still shaky at best, META's earnings expectations are on the rise, thanks to a dramatic U-turn on spending that's still playing out.
Bunge yields solid gains after being added to the S&P 500 (BG)
Bunge (BG +14%) is yielding solid gains today following the announcement yesterday after the close it would join the S&P 500, replacing Signature Bank (SBNY), which was taken over by banking authorities after failing this past weekend. Today's push is due to index fund managers tracking the S&P 500 having to purchase shares of the company, instead of upbeat earnings results or positive news stemming from within the company.
Still, even though this buying activity can dissipate quickly as fewer indexers purchase shares over the coming days, it is worth taking a deeper look at the company to see if this upbeat momentum can continue.
- BG is a global agribusiness and food company, similar to Archer Daniels Midland (ADM), processing oilseed and grain and producing wheat flour, sugar, and ethanol across North and South America. Most of its production stems from South America, mainly Brazil. The company splits its operations into three segments: Agribusiness (~71% of FY22 revs), Refined and Specialty Oils (~25%), Milling (~4%), and Other (<1%).
- BG recently reported Q4 earnings in early February. Its headline numbers did not stand out, squeaking out an earnings beat, missing sales estimates by a sizeable margin, and guiding FY23 adjusted EPS below consensus. Part of its woes was attributed to weakness in Europe, where BG faced high energy costs, and South America, where tight bean supplies clipped margins. However, in North America, results shined, helping to partially offset the weakness felt overseas.
- Looking ahead to 2023, management expects the market environment to resemble that seen throughout 2022. BG forecasts ongoing supply chain delays this year, although lead times for simpler equipment show signs of normalizing. The company also expects the costs of doing business to accelerate due to a resumption of normal business activities and increasing investments.
- However, on a more positive note, crop supplies will remain tight globally throughout the year, potentially boosting margins. Furthermore, BG expects strong demand for its core protein meal and vegetable oil products to continue, possibly driving higher margins.
- Unfortunately for BG, even though margins may expand due to favorable supply and demand dynamics, it is not foreseeing the same magnitude of margin-enhancing opportunities it captured in FY22, explaining its downbeat earnings guidance.
Overall, the global economy will likely remain volatile over the near term, partly explaining why shares of BG have been on a rollercoaster ride over the past year. Being added to the S&P 500 may continue to lift shares over the next several days. However, to maintain that positive momentum, BG will rely on numerous moving parts to remain favorable, such as tight supplies and robust demand, or reverse course, like lingering supply chain issues.
United Airlines descends as rising labor costs, softening pricing power raise margin concerns (UAL)
Rising costs, including for hiring and labor, have accompanied a strong demand environment in the airline industry over the past several quarters and now that upward pressure on pilot wages is about to substantially cut into United Airlines' (UAL) profits. Last night, the Chicago-based airline lowered its 1Q23 EPS outlook to $(1.00)-$(0.60) from $0.50-$1.00 due to anticipated expenses related to a potential new collective bargaining agreement with employees represented by the Air Line Pilots Association.
- It's important to note that there's an imbalance between the number of trained pilots available and the current demand level for air travel. During UAL's 4Q22 earnings call, the company estimated that the current demand environment calls for about 10,000 pilots, which is about 3,400 more than the current supply.
- This shortage is making the labor market extremely competitive for pilots, pushing wages higher. As an example, on March 1, Delta Air Lines (DAL) ratified a new Pilot Working Agreement that's worth $7.2 bln over the course of four years. As part of the agreement, DAL's pilots immediately received an 18% pay increase, with a 5% increase pegged for next year.
- Now, UAL is feeling the pressure to sign a new deal with its pilots in order to prevent an upswing in employee turnover. Apparently, the company sped up its timeline by a quarter to ratify a new deal. In last night's filing, UAL said that the expense accrual was shifted from 2Q23 to 1Q23.
- Therefore, the downside Q1 EPS guidance is essentially just a timing issue as UAL was always expecting its labor costs to rise this year. This is reflected by the fact that UAL reaffirmed its FY23 CASM-ex forecast of approximately flat versus FY22, and its FY23 EPS of $10.00-$12.00.
Perhaps the bigger concern is that UAL also reduced its Q1 total revenue per available seat mile (TRASM) guidance to +22-23% from its original guidance of about +25%.
- TRASM is a metric that measures an airline's pricing power, which has been quite robust due to reduced capacity across the industry, and travelers' willingness to pay higher prices for premium seats.
- This slight cut to UAL's Q1 TRASM outlook is a function of the slower travel months of January and February growing at a lower rate compared to the busier travel months experienced in the spring and summer.
- However, the underlying concern is that UAL's pricing power will continue to erode as it adds capacity. The company disclosed that Q1 capacity is now expected to be up around 23% on a yr/yr basis, which is three points higher that its prior guidance. Lower airline fares, coupled with rising labor costs, have investors worried that UAL's profit margins may be squeezed in the coming quarters.
The good news is, demand remains strong, even in the face of persistent macroeconomic uncertainty.
- Not only did UAL nudge its Q1 total operating revenue growth guidance higher to +51% from up approximately 50%, but a host of other airlines also provided reassuring forecasts this morning. For instance, DAL and Alaska Airlines (ALK) reaffirmed their outlooks for Q1, while JetBlue (JBLU) raised its revenue growth forecast to 32-35% from 28-32%.
The main takeaway is that UAL's guidance cut to Q1 EPS is mainly a timing issue as it hits the accelerator on ratifying a new labor contract with its pilots. Although the company reaffirmed its FY23 EPS guidance, the stock's sell-off suggests that there's some skepticism that UAL will achieve that outlook as its costs rise and as increased capacity cuts into its pricing power.
GitLab under heavy pressure despite Q4 upside as guidance takes investors by surprise (GTLB)
GitLab (GTLB -28%) is under pressure despite ending FY23 on a positive note with a much narrower than expected loss for Q4 (Jan) with nice revenue upside. The main problem for this provider of software development tools was revenue guidance for both Q1 (Apr) and FY24 coming in quite a bit below analyst expectations.
- So, what was the problem? The macro environment is weakening. Towards the end of Q3 (Oct), Gitlab started seeing greater deal scrutiny on some deals, lower expansion rates and a slight uptick in contraction. These factors became even more pronounced during Q4. The company said that some customers experienced changes in their businesses, which led to either hiring slowdowns or reductions in workforces. This impacted expansions, primarily in GitLab's Premium tier and led to an uptick in customer contractions and churn.
- In terms of the greater level of deal scrutiny, at the end of the calendar year, companies re-evaluated their overall spending plans heading into the new year. GitLab said it saw more people involved in the approval processes, which led to longer sales cycles. The good news is that the comprehensive nature of its platform and the predictability of a subscription rather than a consumption model helps GitLab relative to competitors, but the macro picture has become a headwind.
- We also think investors are disappointed that conditions worsened as the quarter went on. Specifically, GitLab said that Dec-Jan acted differently than Nov. GitLab saw contractions increase, pipelines are getting pushed out and deal sizes got smaller late in the quarter. Typically, on new deals, customers buy a number of extra licenses, but now they are buying just enough for what they need at the time. Investors tend to view softness late in a quarter as more concerning than early in the quarter because the weakness tends to spill over into the next quarter or more.
- Despite the softening macro picture, GitLab announced in early March that it will increase the list price of GitLab Premium from $19 to $29 per user per month. This was GitLab's first price increase in more than five years and it reflects the evolution of GitLab from source control and CI to becoming a comprehensive DevSecOps platform. Since February 2018, GitLab Premium has added over 400 new features.
Overall, we think the weak guidance was a bit of a surprise to investors given that GitLab just announced the price increase on March 2. In fairness, GitLab also announced a 7% workforce reduction on February 9, so it has been a period of mixed messaging. However, given the aggressive sell off today, we think investors were lulled into a false sense of security by the price hike. The new fiscal year is getting off to a rough start.
Uber, Lyft (LYFT), and DoorDash (DASH) deliver solid gains after favorable Prop. 22 ruling (UBER)
Ride-hailing firms Uber (UBER +5%) and Lyft (LYFT +4%), as well as food delivery giant DoorDash (DASH +5%), are all stepping on the gas today. The positive price action comes after a California appeals court overturned a lower-court decision yesterday after the close barring the companies from classifying their drivers as independent contractors.
The California court's ruling on Proposition 22, which allowed UBER, LYFT, and DASH to employ the independent contractor model, only affects these companies' California-based workers. It is uncertain how much revenue each company derives from the state. However, given that Ballotpedia reported the campaign behind urging California voters to vote "Yes" for Prop. 22 topped $180 mln between the three firms, California is clearly a major market for the ride-hailing and delivery companies.
Even though UBER, LYFT, and DASH are enjoying solid gains today, the companies did not expect much to change, even if the ruling on Prop. 22 was unfavorable. For example, UBER commented last week that whatever the decision for Prop. 22, it was going to be appealed. LYFT shared similar remarks last month, stating that whichever way the ruling goes, the next step is likely an appeal by either side to the California Supreme Court. Therefore, even though the ruling was favorable, UBER and LYFT expect the opposition to appeal the decision to the state Supreme Court, so the uncertainty has not totally dissipated.
Meanwhile, New York remains an overhang on these companies, albeit to a lesser degree. The Department of Consumer and Worker Protection (DCWP) proposed a rule for a minimum pay rate ($17.96/hr or approximately $0.50 per minute of trip time) for app-based restaurant delivery workers. A second hearing on the matter is scheduled for April 7. UBER mentioned last week that it believes New York is taking its time to get the decisions right regarding delivery. The state also only comprises about 2% of the company's total volume on a global basis. As such, UBER expects it can make the appropriate adjustments, so the decision has a net neutral effect on EBITDA. LYFT was also unconcerned about New York, stating last month that a classification build does not seem to be a priority for the state.
The main takeaway is that although a favorable ruling on Prop. 22 is sending shares of UBER, LYFT, and DASH nicely higher today, they are still not out of the woods regarding classifying drivers as independent contractors. UBER and LYFT have previously stated that the next steps, regardless of a ruling, would be appealing the decision to the California Supreme Court. Therefore, not all uncertainty has been cleared up, although the appeals process can be lengthy. Furthermore, the ruling can set a precedent for other states to follow.
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